ITC sees growth momentum despite VAT

BANGALORE: Despite the decision to impose a 12.5% VAT(value-added tax) by many state governments on tobacco, cigarette major ITC believes that its growth momentum is intact and will come from all key segments be it hotels or foods or paper businesses, according to Mr Y C Deveshwar, chairman of ITC.

Speaking to the media, Mr Deveshwar said:”The outlook is good. We are confident of sustaining the growth movement.” While refusing to comment on the financial impact of the decision to impose VAT on tobacco, he said that VAT would only increase the burden of taxation on cigarettes and that it was more a tax on tax.

He said that the company was investing large sum of money on its hotel business. “We plan to have three new hotels up and running. The facility at Chennai for instance which is coming up on an eight-acre plot is the biggest one in India. Besides this the Bangalore facility should be operational soon and one more in Ahmedabad. Money is not a concern for us and we are ready to invest if land is available,” he said.

Referring to the foods business, Mr Deveshwar said that the game plan was to become one of the top players in each segment where it operated. “We are leaders in staples/spices and in the ready-to-eat(RTE) business. In the snack food business we have launched BINGO,” he said.

Queried why ITC was shying away from acquisitions, Mr Deveshwar said that the company looked at various issues including valuations. “We have added the paper facility of BILT recently but if we think that the valuation is rich we walk away even if we have taken 99 steps and that one crucial step is yet to be taken,” he said. He said that global experience had shown that 60% of the acquisitions were not creating value.

On ITC-Infotech, Mr Deveshwar while noting that the business had been set up as a separate company said:”Given the structure we would have to go for an IPO to service the ambitions of the employees we have not decided on the timing for such an exercise.”